Accumulation or distribution is a momentum indicator that tracks the relationship between volume and price of a stock. It is often believed a leading indicator because it shows when a stock is being accumulated or distributed, forewarning major price moves. It is estimated by first computing the money flow multiplier and then multiplying the money flow multiplier by the period's volume.
It is an indicator that When the Accumulation/Distribution line is moving in the same direction as the price trend, it confirms the trend. Whereas if is moving in the opposite direction of the price trend, it indicates the price trend may not be sustainable.
The accumulation/distribution line may be used as an indicator to confirm whether a stock is trending. If stock price is in a downtrend while the accumulation/distribution line is in an uptrend, the indicator shows there may be buying pressure and the stock price may reverse. Consequently, the stock may reverse and trend up and vice versa.
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